CREDIT SUISSE: 5 REASONS TO STAY BULLISH NEAR-TERM
by ilene - February 23rd, 2010 6:57 am
CREDIT SUISSE: 5 REASONS TO STAY BULLISH NEAR-TERM
Courtesy of The Pragmatic Capitalist
Credit Suisse recently reiterated their call to buy the dips (see here for the original call). Despite being bearish overall on 2010, they maintain that the first half of 2010 could be a fairly constructive year for equities (see their full year outlook here). In the near-term, they continue to like stocks due to 5 primary reasons.
Over the last few months the markets have been roiled by sovereign debt fears, China tightening fears, Fed actions, and bank regulation. Credit
First, they say the fears in Greece are substantially overblown and will not lead to a global bond funding crisis:
1) Fears of a global sovereign credit crisis are overdone: US, Japan and German bond yields have fallen, as has gold (hardly the sign of a funding crisis). The problems in peripheral Europe are akin to those of California in the US: Severe deflation is required, but the problem is confined. A global bond funding crisis will not be seen, in our opinion, until private sector credit growth returns (probably in 2011)—government interest payments as a % of GDP are still low, at 1.3% of GDP in the US. The risk, in our view, is that the UK could end up with a minority government, which might bring forward a UK funding crisis.
Second, CS says the fears about China are overdone. Growth remains robust in China. Other countries can only wish to have such a problem. As of now, it is not a major concern:
2) Worries about China tightening: We believe China is likely to grow at around 10% until there is major economic, as opposed to financial, overheating, which would be reflected in a sharp acceleration in wage growth and export price inflation.
A lot has been said about the end of quantitative easing and what will occur in bond markets when the Fed stops buying. CS says demand for bonds will remain high regardless of the Fed’s actions.
3) The end of QE: We think banks will replace central banks as
…
 Twitter
|
LinkedIn
|
 del.icio.us
|
|
SMALL SPECULATORS REMAIN BEARISH
by ilene - February 17th, 2010 11:11 pm
SMALL SPECULATORS REMAIN BEARISH
Courtesy of The Pragmatic Capitalist
The latest data from the CFTC shows continued bearishness from small speculators. Small speculators have been skeptical of the rally since its inception and remain so. More importantly, they have been wrong. This cruel market gave them a taste of victory over the last few weeks before snatching back half of the losses. Despite my cautious tone since S&P 1120, I fully disagree with the small speculators. You cannot be short equities in the face of the strong trends we continue to see. Earnings are likely to continue to be robust, we are approaching another stimulus based spring real estate season and stimulus in general remains accommodative. Small speculators as a contrarian indicator is likely to continue working.
|
Twitter
|
LinkedIn
|
del.icio.us
|
|
David’s Five Keys to Identifying a Fundamental Day Trade
by ilene - February 2nd, 2010 11:44 pm
In the Oxen Group section, David recommends a couple day-trades, usually in the morning, often a stock or ETF to buy, and a stock or ETF to sell short. David selects his trading candidates based on his “fundamental day-trade system,” and his analysis of the technical condition of the market. He attempts to choose stocks and ETFs that are likely to move 3-5% during the day, and also to open and close the positions at optimal times.
David selects trades by first examining five key sources of information to help him find "high probability trades." After selecting the trades, he applies several basic trading rules. He has an excellent track record, which is posted in the Oxen Group section and updated every few weeks. Previously, David wrote about the first two of his fundamental keys. Here, David writes about all five of the most important factors he looks at. – Ilene
The Five Keys to Identifying a Fundamental Day Trade
By David at Phil’s Stock World
Identifying the Fundamentals
Stocks move under the influence various factors that we can use to identify stocks that are likely to move 3-5% in a single day. Even the best technicals seldom give you 5% upward (or downward) movements intraday alone, but combined with fundamental factors, we can find stocks that are likely to make these large daily moves.
To begin to seek that perfect stock or ETF, we first need to look for something that can propel a stock or, in the case ETFs, the represented sector. This 3-5% movement is not from the previous day’s close, but between the market’s open and close. We want to identify a stock that can be bought sometime in the morning to give us that significant movement by the end of the day. The first type of information that is prone to easily move stocks is earnings.
For example, if one company announces positive earnings because it had a large profit from a lawsuit, this information does not tell us much about
…
|
Twitter
|
LinkedIn
|
del.icio.us
|
|
FUND MANAGER BULLISHNESS COULD BE WARNING SIGN
by ilene - January 20th, 2010 6:26 pm
FUND MANAGER BULLISHNESS COULD BE WARNING SIGN
Courteswy of The Pragmatic Capitalist
The January Merrill Lynch
In terms of asset allocation, fund managers have turned substantially more aggressive. Cash levels are now at their lowest levels since 2007. Fund managers have aggressively deployed cash into the equity markets:
“Average cash balances have fallen to 3.4 percent, the lowest reading since mid 2007 and down significantly from 4.0 percent in December. Appetite for equities is strong. A net 52 percent of asset allocators are overweight equities, up sharply from a net 37 percent in December.”
Much of this cash has poured into commodities:
In terms of regions, the U.S. remains an underweight as investors continue to favor emerging markets:
This survey is showing some contrarian sell signals. Just 45% of fund managers are protecting themselves against a downturn versus 52% in December. The survey also shows a strong appetite for risk and high beta names. According to Merrill’s analysts the survey could be cause for alarm:
“This survey is one of the more bullish we have seen and suggests that investors buy into the idea that this recovery has legs,” said Gary Baker, head of European Equities strategy at BofA Merrill
Lynch Global Research. “We are, however, seeing early signs that might alert contrarians looking for a selling opportunity – namely low cash allocations and possible complacency against a sell off in stocks,” said Michael Hartnett, chief Global Equities strategist at BofA Merrill Lynch Global Research.
Source: ML
|
Twitter
|
LinkedIn
|
del.icio.us
|
|
THE BIG MONEY IS BULLISH WHILE SMALL MONEY IS BEARISH
by ilene - December 17th, 2009 2:08 pm
THE BIG MONEY IS BULLISH WHILE SMALL MONEY IS BEARISH
Courtesy of The Pragmatic Capitalist
As a futures trader I routinely check the commitment of traders report released by the CFTC. For those who aren’t familiar with the report it is a breakdown provided by the CTFC of each Tuesday’s open interest for market positions in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC. It’s widely followed in trading circles and gives a glimpse into what the big money, commercial money and even the small money is doing with their positions.
What piqued my interest in this data were comments in Tuesday’s “Breakfast with Dave” by Gluskin Sheff’s David Rosenberg implying that the equity markets were overly bullish because the commitment of
I have found over the years that the commitment of traders report tends to be a fairly weak short-term indicator. In fact, the COT tends to be more useful in following the long-term trends of large institutions and where they are currently investing money. Mr. Rosenberg’s implication that the current net bullish position should be seen as a contrarian sign is not necessarily true. After all, big money moves prices and knowing where the big money is going is more often than not a good indicator of where to put your money as opposed to what to avoid. But let’s go even further.
One of my favorite indicators is actually the reporting of small speculators in the CFTC’s report. This shows us what the amateur and small-time futures traders are doing with their money. I have found over the years that this is a fairly reliable contrarian indicator. As you can see in the chart below these traders were net bullish in just 4 weeks over the last year. The last time small traders were substantially net bullish was just before the market crumbled at the beginning of 2009. But what is it telling us now? As of last week’s report it is showing the largest net short position since the week following the March 8th bottom. In other words, small speculators were this…
|
Twitter
|
LinkedIn
|
del.icio.us
|
|
SENTIMENT READINGS SEND UP WARNING SIGNALS
by ilene - August 6th, 2009 4:55 pm
SENTIMENT READINGS SEND UP WARNING SIGNALS
Courtesy of The Pragmatic Capitalist
The latest sentiment readings are disturbingly bullish. The market has not been at such psychological extremes since major market tops were last put in place. The latest reading from trade-futures Daily Sentiment Index reported 88% bulls among S&P 500 traders. The last time a reading this high was reported was on October 9, 2007 – a top in the Dow.
Meanwhile, the AAII weekly reading ticked up 2 notches to 50. We haven’t seen a reading of 50 since the market peaked back in May of 2008 just after the Bear Stearns and Fed intervention rally.
Adding insult to injury is data from Bloomberg reporting that just 3% of investors are bullish on the dollar. If you’re looking for the contrarian of all contrarian bets the dollar might just be your bet. A rising dollar in this environment would surely be a brick wall in front of equity markets. Remember, investors can remain irrational longer than you can stay solvent, but the warning flags are waving. This is a game of risk management and the risk/reward of this market is currently unfavorable. I would liken the current environment to a card counter who has just been on a tear playing blackjack, but finds that the deck is currently running low on face cards. The odds now favor the house. You can stay and press your luck, but the smart move is to simply walk away from the table….
* Special thanks to reader Dean for contributing to this piece.
|
Twitter
|
LinkedIn
|
del.icio.us
|
|
Oxen Group: Buying ERX
by David Ristau - July 14th, 2009 8:49 am
David at The Oxen Group’s getting back into energy.
What to Buy: ERX
The Oxen Group has been pushing for the downward trending of oil over the past couple of weeks as it was just way too overvalued, but as oil dipped below $60 per barrel, investors, who are looking to put money back into the market, may find tomorrow is the start of a movement back up for oil. That is why we are recommending Direxion Daily Energy Bull ETF (ERX) Earnings season is under way, and thus far, the big names of Family Dollar, Alcoa, and CSX all have done better than expected and seen the economy bottoming.
Tomorrow, Goldman Sachs and Johnson & Johnson release earnings and pre-market, which could continue the trend. We are bullish on Goldman Sachs to blow the earnings out of the water and continue to provide the market with a positive catalyst. The real news, however, that could spark some interest in the oil market is Singapore. The country reported that for their Q2 they moved out of a recession and are seeing growth in their economy. They even revised their country’s drawback from 6-9% to 4-6%, sending up the Asian markets and the price of oil. The oil market should get a major boost from this news.
Futures are already up in all three major indices, showing that investors are expecting to take the market higher. The retail sales number is the big economic indicator coming out tomorrow. While retail sales do not directly affect oil, this indicator could push the market one way or another. With oil having been driven down, ERX has suffered greatly. If oil has some movement up, ERX will make a major move.
Entry: Recommend buying in 15-30 minutes into session.
Exit: We recommend exiting after a 3-5% increase.
Stop Loss: We recommend a 3% stop loss on all buy in prices.
Upper Resistance: 27.50 – 28.00
|
Twitter
|
LinkedIn
|
del.icio.us
|
|
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site